finds its way back

8/7/2019 finds its way back

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Plannins;Its WayBackfter losing its wayin utilities and cor-porate Am erica ingeneral^ strategic planning is returning^ thistime on a new path. By Eric KrellHiled as management pioneers in themid-1960s, strategic planners broughtform to a strategy-making process thathad long operated more on guts andinstincts than on discipline. They manned newly created corporate stra-tegic planning departm ents. Their mission was to design specializedplanning systems and new ways of going about the process. These sys-tems and m etliodologies c hurned out precise instructions to which theircolleagues in operations and other functions adhered so that they couldcraft and execute strategies without erring from the plans.


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As the new departments gained inpopularity, they aiso grew in size and,some com plained, in their extreme ad-herence to an academic and theoreti-cal approach to their jobs. By the early1990s, their over-formalized and tidyassessments of corporate strengths andweaknesses had grown too detachedfrom the me ssy reality ofdynamic business risksand opportunities.GE's Jack Welch, tiredof all the big bind ers fiillof strategy blueprintsthat often stayed on thebookshelves, famouslyfired his strategic plan-ners. Hastening strategic

pianning's fall from thecorporate garden's gracewas The Rise an d Fall ofStrategic Planning (NewYork: The Free Press) in 1994 by re-nowned management professor HenryMintzberg. The book pronou nced stra-tegic planning a failure and strategicplanners the culprits in an inflexiblecorporate w orld."Strategic planning, as it has beenpracticed, has real ly been strategicprogramming, the ar t icu la t ion andelaboration of strategies, or visions,Eric Krell is a business writer in Austin, 7X

When companiesunderstand the

difference betweenplanning and strategicthinking, they can get

back to what thestrategy-making

process should be.

that already exist," Mintzberg wrote"When companies understand the difference between planning and strategic thinking, they can get back to whathe strategy-making process should beCapturing what the manager learnfrom all sources (both the soft insightfrom bis or her personal experienceand the experiences ootbers throughout thorganiza t ion and thbard data from markeresearch and the likeand t hen syn thes i zing that learning inta vision of the direct ion that the businesshould pursue."Mintzberg migbt bpleased that his kind ostrategy m aking thrivewithin electric utilitiein 2007. In m any c om panies, strategymaking and strategic thinking worhan d-in-h and. Strategic planners faciitate healthy collaboration inside anoutside the organization, generat infresh and actionable insights on thhuge issues: baseload capacity construction, potential carbon constraintrenewable energy standards, advancemetering infrastructure, energy effc iency , and o ther be t - the-compan


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KEMA67 South Bedford StreetSuite 201 EastBurl ington, MA 01803781 /273 -5700www.kema.comContactKrjsten Brewitt, Corporate Communicationskri sten .brewitt kema. co mWith 80 years of experience in servingenergy and utiiity clients, KEMA has de-veloped a reputation for integrating deeptechnical and functional capabilities withmanagement expertise to provide soiutionsthat deliver profitable, reliable, sustainableresults. KEMA specializes in business andtechnical consulting, operationai support,measurement and inspection, testing, andcerti f ication.

More than 500 energy and util ity clientsin more than 70 countries rely on KEMA'simpar t ia l , objective, and expert consult-ing services to plan, bui ld, and maintaintheir strategies for growth. KEMA's clientsinclude energy and uti l i ty companies, in-vestors, government agencies, and majorindustrial electricity consumers. KEMA alsoserves energy and util ity sector suppliers,electrical component and end-productmanufacturers, and retai l and wholesaleenergy traders.

KEMA's 1,500 professionais dedicatedto the global energy and util ity industriesinclude ieading authorities and innovatorsin energy and util ity technologies and mar-kets, as well as in business and manage-ment processes.KEMA's North American business opera-tions are headquartered in Burl ington, MA.Parent company, N.V. KEMA, is headquar-tered in Arnhem, the Netherlands, withsubsidiaries and offices worldwide, www.kema.com

KEMAi

chal lenges . The s t ra te-g i c -p l ann ing p rocesseshelp synthesize insightsfrom diverse sources forthe CEOs and their execu-tive teams to digest andthen relay strategies to anexpansive team of stake-holders with objectivesthat can be moni tored ,managed, and, above all,executed.

"It 's all about startingwitb the vision from theCHO and tb e bo ard ," ex-plains Mark Myers, vice president ofcorporate panning at Progress Energy."You need to understand where theywant to take the company and thentranslate it in a way that allows you toset up tbe organization to work in acollaborative way to move that agendaforward. For strategic planning to besuccessful, it nee ds to be as collabora -tive as possible tbrougbout the orga-nization."

Are the strategic planning efforts among eiectric ut i l i t ies devoid oobstacles? Not by a lonshot. I lowever, it is appaent to many in tbe industry that strategic planninstaffs are more focuseand bet ter equipped tfaci l i tate and, in mancases, participate in strategic planning tbal baevolved beyond a discreeannual exercise into aongoing process.

"We do not have a single d ocum enwe upda te. There is no tome that say'This is Ameren's corporate strategy.says Steve Kidwell, the c om pany's manager of strategic planning. "It 's mucmore a set of processes, meetings, another forms of collaboration."

That strategic thinking thrives imany companies within an industrwhere it had faded awayunseen during tbe recent back-to-basics push, o


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HuronConsultingGroup550 West Van Buren StreetChicago, IL 606078 6 6 / 2 2 9 - 8 7 0 03 1 2 / 5 8 3 ^ 7 0 0www.huronconsultjnggfoup.comContactMichael Laros312 /880 -3874mlaros@huronconsu i t in^roup.comMichael O'Connor312/583-8724moconno r@huronconsu l t i n ^oup .comHuron Consulting Group helps clients et-fectively address complex challenges thatarise in litigation, disputes, investigations,regulatory compiiance, procurement,financial distress, and other sources ofsignificant confl ict or change. The com panyalso helps clients deliver superior customerand capital market performance throughintegrated strategic, operational, and orga-nizational change. Huron's staff providesservices to a wide variety of both financiallysound and distressed organizations, includ-ing Fortune 500 companies and medium-sized businesses.

Our util ity consulting professionals providerate case, financial , and operational con-suiting services to util ity companies. Wedeliver the crucial combination of industryexperience and commercial expertiseneeded to address a full range of complexissues affecting the cost, quality, and reli-ability of service that electric, gas, water,and telecommu nications executives facetoday. Our world-class util ity consultingteam consists ot former corporate execu-tives from Fortune 100 utility companies aswell as seasoned consultants, many hav-ing more than 20 years of relevant util ityexperience.For more Information, please contact us atwww.huronconsultinggrQup.com.

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even further back, prior to deregula-tion, when planning referred almostexclusively to resource planning, notcorporate planningrepresents a par-adox Mintzberg mightenjoy. After all, his coyproclamation of strate-gic p ianning 's demiseac tua l ly con ta ined adetailed plan for its im-provement , which bymost counts, appears tohave taken root amongelectric u tilities of variedshapes and sizes.

"There was a sensethat we needed to dosome strategic planningto better prepare ourselves for out-comes that are simply not predictableor static as they were a nu mb er of yearsago," notes Ian Yeates, manag er of cor-porate planning and regulatory affairsfor SaskPower. "As a result, planningthroughout the industry began to oc-cur in a more traditional strategic plan-ning context. When you start adding itall up, the old plan ning world of simplysorting out engineering shortfalls andbasing business plans and budgets onthose needs just doesn't cut it."Other paradoxes appear in currentstrategic planning approaches. Lead-ing strategic planners simultaneouslytake responsibility for strategic plan-

Electric utilitiesboth large and small

have significantlychanged their

strategic planningstructures, approaches,

and roles in the pastfive years.

ning and insist that the process is thmission of the entire organization. Amany utilities, the strategic planningroup, whether nestled in the financor legal functions or operating as a stand-alonunit , has never beenleaner. Yet, its reachappears to have grownstronger, more visibleand more thoughtfuthan ever before.

"The conven t ionaw i s d o m n o w h o l dthat there is a difference between strategiplanning and strategithinking, or strategy development," says Dean Maschoff, vicpresident of energy and environmenpractic e for CRA Inter natio nal. "Therwas a sense in the industry that strategic planning was becoming too muchof a check-the-box exercise and noenough time was being spent on thactual development of strategy. Thasense caused some major rethinkinabout the role of the strategic planningfunctionand some major changes."A Different PlanetElectric utilities both large and smalhave significantly changed their strategic planning structures, approachesand roles in the past five years. Go bac


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CRAInternationalCRA International is a world leader inproviding economic and financial expertiseand management consulting services tothe energy sector (oil, natural gas, power,coal , and renewable energy).For over 40 years, CRA lias offered aunique combination of deep industry expe-rience, broad expertise in a range of func-tional discipl ines, and rigorous eco nomic,f inancia l , and market analysis to senior ex-ecutives, regulators, policymakers, and lawfirms around tbe world. Our btgb-stakes as-signments include asset valuation, marketdesign, auctions, l i t igation, environmentalstrategy, and advice on strategic decisionssucb as business restructuring and bedg-ing. We have structured multi-billton-dollarmarkets, offered expert testimony in casesinvolving bill ions of dollars in claimed dam-ages, and played a key role in most electricutility mergers and acquisitions In NorthAmerica over the past decade.

Headquartered in Boston, CRA bas over 20offices on four continents. More informa-tion is available at www .crai.com.

INTERNATIONAL

ten to fifteen years, and the contrastgrows even more dramatic. Deregtila-tion, the back-to-basics push, geopo-litical uncertainty, a recentproliferation of environ-mental issues, and otherexternal forces sparkedthe change."It may not be un prece-dente d, but we're certainlyenter ing another per ioddriven by different c hal-lenges than in the past ,grea t uncerta in ty aboutfuture and, therefore, realchal lenges in s t ra teg icplanning," Kidwell notes.Prior to deregula t ion , so-ca l led"strat planning" focused squarely onregulated returns, asset build up, andlong-term demand projections withinwel l -defined serv ice jur i sd ic t ions ."Strat pianning was almost limited lothe engineering function," recalls JoeScalise, a partn er in Bain & Company'sglobal energy and utilities prac tice. As

such, strategic planning previously relied much more on calculating supplyand demand projects than on complicated evaluations of more intangibland interrelated uncertaint ies, suchas public and political perceptions oenergy use, geopolitical unrest, regulatory trends , shareholder sen t imentsfast-growing Asian economies, andworldwide demographic trends, sayScalise. Ten years ago, SaskPow er co nd uc t ed facilities, engineering, andcapacity planning to sorout when it needed newgenerat ing faci l i t ies tdeal with load growthnew w i re s t o connec

c u s t o m e r s , a n d n e wtrans mis s ion l ines . "Iwas done purely on anengin eering basis," Yeaterecalls. "The underlyinassumption was that tomorrow will be just like today excepbigger. Strategic planning didn t reallyoccur. Since that time there have heenso many changes to that essential lystat ic environment that i t 's a completely different planet."As a result, SaskPower and manyother electric utilities now count resource planning, regulatory relations


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EnspiriaSolutions, Inc.6560 South Greenwood Plaza Boulevard,Suite 500Greenwood Village, CO 80111-7100www.enspir ia.comContactCindy Menon, Marketing Manager303/520-2513cmenon@enspir ia.comEnspir ia Soiutions Is a leading providerof consulting and systems integrationservices to the utility industry. We helputil it ies improve operational effectiveness,asset performance, customer service,and energy effic iency. Headquartered inDenver, Enspiria Solutions is backed by thefinancial strength of its parent companyOsmose Holdings, Inc., with $550 mill ionin annual revenue.

At Enspiria Soiutions, we are very proudof our satisfied customers. With over 2,700client engagements, we have gained anunparalleled depth of industry subject mat-ter expertise, in the emerging arena of ad-vanced metering infrastructure, Enspir ia'sstaff has performed AMI projects for morethan 15 util it ies, touching more ti ian 35mill ion meters across North America.Enspiria Solutions specializes in Advanced metering Infrastructure Asset /work management Demand response Dis tr ibut ion/substat ion automat ion Enterprise infrastructure/integration Field force automation Geographic information systems Outage management systems Smart gridOur personnel are industry leaders in thedesign, business case development, just i-f ication, deployment, systems integration,and enhancem ent of IT systems.

nspiria''SOLUTIONSAnOsmose, Company

and com mun ity relalions as integratedcomponents of the strategic planningproc ess . CEOs and boa rds of direc-tors have taken a much more activeand visible role in theprocess. And more ex-ecutives, managers, andemployees throughoutthe organization nowcontribute to a contin-ual process."We involve manymore people up front,"says Eric Norberg, Min-nesota Power 's seniorvice president of strat-egy and planning. "Nolonger does a strategicpianning department once every threeyears update a big formal plan that isthen put on the shelf. We're keying onflexible plans that can be continuallyreviewed, updated, and adapted tochan ge. It is not a static p lan."Ameren's strategic planning processhas been an ything but static in the past36 months. The company's board ofdirectors embraced a more active roleas a strategy counselor, as evidencedby two strategic off-site retreats withthe officer group in the past two years.

Wlien tlie system isused as intended, ittransforms strategic

planning from a theo-retical exercise into

measura blean dtherefore, managable

action.

Ameren 's three operat ing businessegments and its corporate functionsalso have taken more active roles instrategic planning. Finally, Kidwell andhis group now collabo-rate with the financeand human resourcefunctions to establisht ighter l inks betweenstrategy, performanceand compensation."Our compensat ionis tied to the 'BalancedScorecard, ' and thosescorecards are drivenfrom strategy," say

Kidwell . "That helpestablish a strong linkbetween the mission, vision, and values of the company, our corporatestrategic init iat ives, and individuaperformance."Dev eloped in 1992, the B alancedScorecard is a management systemtha t he lps the company t r ans l a t estrategy into action by meas uring andcom mun icating the status of corporateobjectives as they are supported, tovarying degrees, by various processesinitiatives, and key performance indi-cators throughout the entire organi


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zation. When the systemis used as intended, itt r a n s f o r m s s t r a t e g i cplann ing from a tlieoret-ical exercise into mea-surableand therefore,manageableaction.ParticipatoryFaciiitation:More Than Two VagueWordsMany of Ameren's sig-nificant changes ema-nate from astrategic planning groupthat consists of five people, includ-ing Kidwell. Operating ieanly requiresKidwell to seed his staff with diverseskill sets and experience and to fosterintensive collaboration on the plan-n ing process throughout the en t i reorganization. (See the sidebar, "NewIdeas.")"The core group should be small,"

says Kidwell. "The impor-tant thing is for the groupto leverage expert ise andengage the organiza t ion .There are a lot of goodthinkers out there. Strategyis not the sort of thing yousit in room and dream upwith staff people. You haveto get out there and primethe pump of the operationsfolks." He also counts onfunctions such as financeand human resources (HR)as key collaboration partners.Myers ' corporate planning group

at Progress Energy also features a leanstaff. When he assumed the role twoyears ago, Myers says strategic plan-ning represented m ore of an acad emicexercise. "It was not integrated withmore tangible financial and perfor-ma nce m easure s that clarified th e valueof the strategy," he ex plains. To correct

that, Progress revamped Its corporateplanning group, which now includesstrategic planning, financial planning,regulatory planning, and corpora te de-velopment (such as evaluating mergersand acquisition op portunities), and re-ports to the chief financial officer."Our group consists of a handful ofpeople," Myers says. "Where you reallyneed the expertise is out in the func-tional areas. We're afacilitation groupto get the people together.'"Facilitation is a tricky word in thestrategic planning vernacular. Criticslike Mintzberg dismissed planners for"over-facilitating"focusing too m uch ,

and from a removed vantage point, onstructure and process. Most planners,according to Maschoff, no longer focusexclusively on planning; they're moreinvolved with the creation of strategy,working beside operational executivesand the c;i;O. "In most c ases," M aschoffsays, "the person now sits at the table

A High Fidel i ty Approach to Ut i l i ty iMark Johnson - A u d i o p h i l e , h a n d y m a n , a m a te u r l a n d s c a p e r ,t rave l en thus ias t , gas and e lec t r i c sub jec t ma t te r exper tW h e n i t comes t o sound rep roduc t i on . Mark Johnson 's ques t is fo rabso lu te c la r i ty , p rec i s ion a n d r e s o l u t i o n . W i t h apass ion f o runcover ing the best technology and a knack fo r ge t t i ng the h ighes tqual i ty for the lov* /est investment, i t 's no surpr ise that Mark 's vocat ionmirrors h is favor i te past- t ime, Mark 's 27 years of u t i l i ty IT exper ience,a long v^ i th h is abi l i ty to l is ten for deta i ls and hear the subt le t ies, haveresonated deeply wi th h is long l is t o f u t i l i ty c l ients. Each component ofevery spat ia l in tegrat ion pro ject he p lans and deploys f rom theda tabase t o t h e eng ineer ing des ign too l s operates in t o t a lsynchronic i ty . ideal ly matched to each ut i l i ty 's needs. The resul t? Pi tchper fec t sys tems in teg ra t ion every t ime .

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Accenture180 North LaSalleChicago, IL 60601www.accenture.com/utilities6ContactMark Papia, North America UtilitiesMarketing Manager727/[email protected] Sayles, Global M arketing Director,Utilities206/[email protected] is a global managementconsulting, technology services, andoutsourcing company. Committed todelivering innovation, our Utilities industrygroup collaborates with its clients tohelp them become high-performancebusinesses.With deep industry and business processexpertise, broad global capabilities, anda proven track record, Accenture canmobilize the right people, skills, andtechnologies to help our utilities ciientsimprove their performance.We work with over 300 utilities in 43countries and serve 83 percent of theGlobal Fortune 500 utilities. As an industryparticipant, Accenture serves 15 millionutilities end-customers in North Americaand Europe, processes 50 million bills at99.9 percent accuracy, reads 30 millionmeters, and handles over 10 millioncustomer inquiries annually.To learn more, visit our web site ataccenture.com/utilities6.

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and is part of the strategy deve lopm entprocess."'Many of the people interviewed forthis story would be better describedas "participatory facilitators." They arejust as likely to pos sess 15 years of op-erational experienc e as an MBA. Each ofthem h as earned, through their on-the-

job experience and plannin g skills, th ecredibility necessary to spark produc-tive collaboration throughout their or-ganiz ations. (See the sidebar, "MakingOff-Sites Work.")Other strategic pian ning executivesprefer to crystallize their roles in evensimpler terms. "The tnarching orders I

I

teve Kidw ell, Ameren's manager ol strategic p lanning , possesses an un dergradu-ate degree in physics, a master's degree in nuclear engineering, another master's inenergy analysis and pubiic policy, an MBA. and more than two decades ot experience

throughout the energy and utility businesses of the St. Louis-based ho lding company. Andhe still feels a bit under-qualitied tor the rigors of strategic plann ing. "I'm threatening to geta Ph.D. in philosophy," he says.

In theory, the b lueprin! tor strategic planning is not nuclear science: Identity risks andopportun ities, agree on objectives, and chart a course. In practice, the execution of a strate-gic plan frequently collides with a diverse collection ot obstacles, Executives can't carve outplanning time from schedules laden with pressing regulatory and competitive issues thatconsume their attention, Veteran operational leaders balk at requests for insight. Turt battlescrop up constantly.

Overcoming those and otherchallenges require what Kidwelldescribes as diversity ot thoughtwithin the corporate planningfunction. That variety, he notes,strengthens the communica-tions about the strategic planningprocess throughout the organiza-t ion. "There is a natural, healtliytension among corporations andtheir business segments aroundwho controls the execution and

development ot strategy, how success is determined, how this whole process runs," Kidwellsays. "You need people who are capable ot ex ploiting the potential strengths ot that tensionas opposed to making it destructive or dysfun ctional."

That explains why Kidwell emphasizes relationship-building skills as he helps his boss,Ameren vice president ot corporate planning Michael M oehn , create more know ledge, ma-turity, and experiential diversity within their tunc tion.

At Progress Energy, vice president of corporate planning Mark Myers seeks a similarmixture ot expertise in his grou p. "We have a collection of people who b ring a variety otbackgrounds to the process," he notes. "We've got some eng ineers, some financial people,and some operations people. That assortment strengthens our ability to probe, ask the rightquestions, and key up the right issues tor the entire organization to consider,"

Kidwell tinds that managers and employees throughout Am eren love to talk about strat-egy. His deep and varied background and expertise plays a valuable role in facilitating thosecomm unications. So, too, does his busy travel schedule. He regularly attends operationai-level strategic planning meetings, such as the management review meetings that Ameren'snuclear operation h olds quarterly, to ma intain connected with the issues and thinking ttiere."Strategic planning is everybody's job," Kidwell says, "I try to get out and talk to operationalgroups in the tield whenever I get the chance. Strategy gets executed every day tor good orill. The more you comm unicate about the need tor processes to be aligned with the execu-tion ot strategy, the better the whole plan works."


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liave really come down as a p hilosophyfrom the top," notes Geoffrey Lubbock,NSTAR's vice president of financial andstrategic planning and poticy. "Thephiloso phy that c ome s from our CEOis that we reatly do what's best for thecustomer. We start off with the endgoaj, which is to do the thing right andthen we work back to how we makemoney at it. The strategy as it comesdown to me is 'Gofix t, Geoff.'"

Fundamental StepsLubbock oversimpi i f ies , but onlyslightly. He and several of his coun-terparts at other uti l i t ies emphasizethat the fundamental steps of strategicplanning are straightforward."If 1 had to identify a bottom lineto strategy, trust is number one. Actu-ally, trust is probably num ber one, two,three, four, and five," Lubbock says."Strategic planning is not running a

thousand numbers or iooking for newmarkets. My job on the strategic plan-ning side is to align interests."For example, NSTAR's collabora-tion with Cambridge, MA, and otherstate and commimity organizationson a $100 million -plu s efficiency ef-fort (designed to reduce annual green-house gas emissions from the city by10 percent during the next four years)represents an alignment of interests.

Making Off-Sites Worke strategy retreats promise enriching collaboration, but

i they frequently come up short of their potential. Executiveswho gather in woodsy conference centers to brainstorm on

the tuture direction of their companies typically discuss too manytopics, with the wrong people, in the wrong way. with inappropriatedata, resulting in no clear co nclusion, says Bob F risch, managingpartner o( the Strategic Offsites Grcup, a firm that counsels clientson methods of gaining greater vaiue trom their strategic retreats.

Frisch, whose guidance on the topic appeared In a HarvardBusiness Reviewbes\ practice article he co-authored last year, es-timates that a $1 billion companyspends $185,000 to $295,000 ona typical three- to four-day off-sitestrategy session when travel costsand the opportunity costs of theparticipants' salaries are tallied.Of course, the costs of mism an-aged off-site planning sessions aremore difficult to quantifyand fargreater.

The agendas (or those meet-ings, says F risch, are otten ahodge-podge of customer surveys,capitai expansion reports, anddepartment budgets. (And usuallygolf.) Instead, those responsibiefor planning and running off-site sessions should embrace a morestructured approach. The planning should begin 60 days before themeeting and include follow -throug h steps that occur after everyonehas returned to their offices, advises Frisch , who offers tfie follow -ing tips for facilitators of off-site meetings:

Before (he meetingm Invite the righ! people that is, the people who can best informthe discussion and the decisions, Identity the right topics to cover avoid the hodge-podge. Design the ends ot the conversation that is, how are you goingto wrap things up, describe action items, etc. Filter the data in a way that gets to the point. Quantity opinio ns don 't let decisicns come about without sub-stance behind them .

Al the meetingm Get the participants to talk in the right way. Break down hierarchy. Keep the conversation discip lined d on't let it stray. Balance analysis with proc es s^a na lys is is important, but pro-cess maintains progress. Use frameworks to move the strategy conversation forward e x-plain right off the bat what the conversation's goals are and what, ingeneral terms, the result will look like. Balance the rational, politica l, and emotional.

Seek genuine alignme nt.Attet the meeting

m Follow up on the outcomeof the meeting.It may sound like a para-dox, but structureon theagenda, in thelacilitator'sopening description of ttiemeeting's objectives, andin themanagement of thediscussionhelps enablecreative ideas to tlow. Ratherthan checking otf tangibleagenda items, such as re-viewing budget numbers andthen turning over the m eeting

to open-ended brainstorming, Frisch suggests a more sequentialprocess. That includes identifying and sticking to time limits forbrainstorming on specific topics with clear objectives.

It also involves quantifying opinions. For example, facilitatorsshould ask specific questions and then tally how the meeting'sparticipants respond. Conclud ing that 75 percent ot the attendeesbelieve the growth prospects in a jurisdiction are 10 percent to 15percent represents more useful and actionable data than walkingaway thinking that growth prospects "are pretty good."

"A small amount of effort can really optimize this crucial and notinsignificant investment." Frisch says, "Companies that decided toinvest a bit more in really think ing about how to drive m ore valueout of off-site have ended up with a significantly upgraded strategyprocess."


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NavigantConsultingjnc.615 North Wabash AvenueCti icago lL 60611800/621-8390, ext , 5736www.navigantconsulting.comContactLaverne Gosling202 /481 -7336laverne,[email protected] Consulting is an independent con-sulting firm providing professional servicesto help clients identify practical solutions tothe challenges of uncertainty and risk. Wefocus on highly regulated industries thatare undergoing significant change-As the energy industry continues to facecritical challenges, clients turn to NavigantConsulting for our independent views, deepknowledge of the energy and financiaimarkets, practical operations soiutions,technology expertise, and strategy andbusiness experience. That's true for powergenerators, transmission ow ners, energyend-users, equipment manufacturers,regulators, and investors alike. Our workreflects our soiid understanding of energyfundamentals: pricing, supply and demanddynamics, regulatory process, marketdesign, customer needs, fuel sourcing,technolo', and finance.

When you need to tackle critical issues andcreate greater value for your organization,turn to N avigant Consulting.

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"When we conserve for customers, andwe can recoup costs througli, for ex-ample, decoupling, that's alignment,"Lubbock explains. "It'saiso my job to ensurethat the regulatory sideunderstands that thealignment exists." De-coupling is a regulatorymeasure that allows util-ities to separate profitfrom how much energythey sell, therehy ensur-ing a profit when theyencourage consumersto conserve energy.

Kansas City Power& Light (KCP&L) conducted a massivestrategic planning effort from 2004 to2006 by collecting information andinsights about energy needs and per-ceptions from com-munity, political,and regulatorystakeholdersand synthesiz-ing that infor-mation within theorganization to pro-duce a comprehen-sive energy plan thatwas vetted to eachexternal stake-holder group forreview and input.(See the sidehar,"Award-WinningExternal Collabo-ration.")

"All s t rategicplanning processesare the same, theyjust have differentlexicons," says Yeates."You sort out what youwant to do at the endof the day and whatyou do now. You exam-ine your values, lookat your environment,look at your resources,and then you plot yourroute. Doing it properlyis highly time-consumingand resource-consuming,but basically that's all it is."

Many electric utilitiesconduct a comprehen-sive strategic planning

process about onceevery three to fiveyears...each plan is

monitored closely andadjusted as needed.

The chalienge lies in the implemen-tation. The gears of execution, strate-gic planners say, are oiled by executiveand board support,comm unications, col-laboration, accurateinformat ion, and ahealthy dose of territo-rial tension among thedifferent business unitsand functions withintbe corporation.

Many electric utili-t ies now conduct acomprehensive stra-tegic planning processabout once every threeto five years, although each plan ismonitored closely throughout the yearand adjusted as needed. Those adjust-ments can occur because of the on-going monitoring and because manystrategic planners also host annualplanning exercises designed to identifyand prioritize shorter-term strategicinitiatives.Progress Energy favors a partici-patory approacb. Myers credits the

presidents of the corporation's twooperating companies. Progress En-ergy Florida and Progress EnergyCarolinas, with taking an activerole in the exercises Myer's grouporganized.The group formed severalteams charged with thinkingabout a specific strategic is-sue. Each issue related tothe vision that the CEO andboard communicated tothe strategic planninggroup. For example, oneteam focused solely ongeneration planning.Recent changes at thefederal level madenuclear a viable op-tion for Progress,and one facet ofthe planning pro-cess examinedthe implications\ on cus to m-ers, sharehol-ers, and otherstakeholders of


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Preng&Associates2925 Briarpark, Suite 1111Houston, TX 77042713/266-2600www.preng.comContactGeorge M. [email protected] & Associates specializes in executivesearch services to the electric power indus-try. For 25 years, we have helped energycompanies fill key strategic leadershippositions up to and including the C-suiteby identifying and evaluating all of the besttalent within the energy industry.Today, companies in the power sector facenew business challenges and may not havethe leadership talent to meet these chal-lenges. An aging leadership team headingtowards retirement, actual retirements,downsizing of the officer core, and attrac-tive severance packages have all takentheir toll on overall leadership capabilityand bench strength.Preng & Associates is helping power com-panies effectively meet this leadership void.Accessing our global network of competentleaders, we succeed through excellentresearch, networking activities and directcontact with the best talent in the energyindustry. Many recruitment firms limit theirapproach to known job seekers and over-look the best candidates for the positionwho may not be in the job market. Prengworks diligently to ciearly define the searchcriteria and match the right individual tothe position and the company's culture.To strengthen your leadership team, con-tact George Rickus, Power Practice Leaderat Preng & Associates.

P R E N G & . A S S O C I A T E ST/ie GJofoal Energv Search Specia l i s t s

Award-Winning ExternalCoilaboration' ansas City Power & Light (KCP&L), a subsidiary of Great Plains Energy, breathed

new lite into its strategic p lanning process in 2 004 by o btaining an unprecedentedlevel of input and guidance from the comm unities it serves. The company received

"one of Edison Electric Institute's Edison Awards last June in recognition of this gro und -breaking initiative.

The approach included a series of comm unity sessions, designed to resemble town hallrneetings, with customers as well as environmental and com mun ity group s. The insightsgenerated at those meetings were captured, analyzed, and distiiled into a $1. 6-b illion ,

five-year comprehensive energy plan designed to supplythe region with reliable, affordable energy from cfeanersources today and into the future.

"The traditional approach used to call for se ttingstrategy firs! and then telling the com munity about it after-ward," says KCP&L director ot p ublic attairs Matl Tidw ell,who played a major role in organizing the communityoutreach ettorts. "We flipped that on its ear and said, l e t ' sgo talk to the com munity first, find out what they have tothink, say, and teel about where we ought to go in the re-gion regarding en ergy and Ihen use that to help set ourstrategy.' We think that's the smartest way to do business,and it's been extremeiy successful tor us."

Tidwell identities three practices that contributed lo thesuccess of the community collaboration.

Long lead t ime s, KCPSL began Ihe outreach processabout 18 months before the finalized plan took altect in 2006. "Starting the process that tarin advance gives you the time to feather your nest betore you need to use it," he says.

Community f i rst . Whiie the company could have reached out initially lo other externalstakeholders, such as regulators or legisiators, it chose to coliaborate with the comm unityfirst as part its CPR strateg yc omm unity, politica l, regulatory tor a clear reason. "Weconscious ly chose to do conduct outreach in the community before we went to the po liticaland regulatory [stakeholders]," Tidweli says. "If you do it right, you can then go to the leg-islative halls and have a very receptive ear because they understand that you have a goodimage In the com munity."

Object ive experts. Rather than larding the agenda with its own speakers and experts,KCP&L enlisted independent subject matter experts from the Rocky Mountain Institute andother environmental and com munity organizations to speak at the comm unity se minars.Doing so reinforced the company's role as facilitating, rather than leading or shaping, thediscussion and debate. It also expanded the expertise and insights that uitimately intormedthe comprehensive energy plan^

t iu il di n g n e w p o w e r p l a n t s . T h e t e a m sa l s o w e i g h e d t h e p o t e n t i a l f i n a n c i a li m p l i c a t i o n s o f n e w p l a n t s a t t h e o p e r -a t i n g a n d h o l d i n g c o m p a n y l e v e l s .A n o t h e r s e n i o r l e a d e r s h i p t e a md e d i c a t e d t o s t r a t e g i c p l a n n i n g e x a m -i n e d a ll t h e i n f o r m a t i o n t h e s t r a t e g i cp l a n n i n g g r o u p a s s e m b le d a n d c o n -d uc t e d a s e r i e s o f t hr e e - h o u r m e e t -i n g s w i t h a b o u t 60 0 m a n a g e r s f ro m

t h r o u g h o u t t h e c o r p o r a t i o n a f t e r theCEO a n d b o a r d f i n a l i ze d t h e p l a n . T h el e n g t h y s e s s i o n s e n s u r e d t h a t " e v e r y -o n e d o wn t o f r o n t -l in e s u p e r v i s o r s u n -d e r s t a n d s w he r e t h e c o m p a n y is tr y in gt o g o , w h a t w e ' re t r y i n g t o d o , a n d h o wh i s o r h e r r o l e , w o r k , a n d l e a d e r s h i pa f f e c t t h e c o m p a n y ' s p r o g r e s s t o w a r do u r o b j e c t i v e s , " M y e r s s a y s .In a d di t i o n , M ye r s h e a d s u p a m a n -


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FTI Consulting,Inc.3 Times Square. 11thFloorNew York, NY 10036www.fticonsulting.comContactMike Ham il ton, Senior M anaging Director212/499-3608Mike.Hamil ton@fticonsutting,comThe energy professionals at FTI Consultinghelp companies develop strategic soiutionsto address a range of compiex, analytic-based prob lems. Ourfe am is comprised ofover 40 professionais and includes formerindustry executives with deep operationaland management experience. These cross-functional teams provide advice for Regulatory strategies Restructuring valuation andmarket

model ing Transaction advisory services Trading and risk management Dispute management Transfer pricing studies Expert testimony" Rate case manage ment Dispute analysis & forensic accounting Public policy Anti-trust Commodity pricing Technology investment decisions Internationai arbitration Process optimizationOur energy solutions professionals haveworked onmany of the industry's high-est-profile business and legal issues. Ourexperience inciudes; Buy-side and sell-side transactions. Extensive expert testimony before

Congress, federal state and regulatoryagencies andcourts, aswell as domesticand international arbitration panels,

Expert witness testimony in numerousrestructuring and l i tigation cases.

Strategic co nsulting on some of the mostcomplex business, financial andeconomic issues.

F T I

like a no-brainer, but ithas been violated manytimes.Collaboration. Effec-t ive co l labora t ion ex-t e n d s t h r o u g h o u t andb ey o n d t l i e co rp o ra -t ion, and it d ep en d s ons t r u c t u r e . "We s p e n da lot of t ime working tounderstand both the ex-pecta t ions and the per-ceptions of our differents takeholders ," expla insGreg Bolloni , assistantvice president of energy

plann ing for Madison Gas & Eiectric. "Asuccessful strategy allows us to satisfy avariety of different stakeholderscus-tomers, shareholders, regulators, andthe community at large."

KCP&L'S current strate-gic plan came out of oneof the indust ry ' s mosextensive collaborationswith external stakehold-ers ever. Effective col-laboration enables thoseand other "data inputs,"such as results of enter-prise risk assessm ents, tostrengthen the scope andconten t of the ult imatestrategic plan.

Productive tensionC o l l a b o r a t i o n s o u n d sfine in theory. In prac-tice, however, it typical ly generatesfriction among different business unitsand corporate functions. After all, thes t ra teg ic p lan helps determine andprioritize initiatives, which in turn af-


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AlixPartners,LLP2000 Town Center, Suite 2400Southfield, Ml 48075www.al ixpartners.comContactJim Peters, 214/647-7500Kevin M. Johnson, 212/490-2500Nothing energizes your bottom line likeoperational excellence.Today, util ity executives must focus on coreoperations including generation, transmis-sion and distribution to deiiver dramaticallyimproved performance. At the same time,the overall operating environment is mov-ing faster. And presenting huge challengesto management and boards of directors.Stakeholders are demanding resultsquicker than ever before. How do you getthem?With help from AlixPartners. We deliverresults fast by using small teams of seniorprofessionals. What's more, our compensa-tion model aligns our interests with yourobjectives. Our track record shows thatwe've successfully helped power compa-nies achieve the performance-changingresults they expect.Our approach , simply stated, is results,not reports. We've set a new standard forworking collaborativeiy with executives toidentify, quantify and execute actions thatgenerate value and thus improve perfor-mance in: Business transformation Supply chain management Due diligence Post-merger integration Asset management" SG&A optimization

We have locations in Chicago, Dallas,Detroit, DCisseldorf, London, Los Angeles,Milan, Munich, New York, Paris, San Fran-cisco, Shanghai, and Tokyo.

AlixPartnersAchieve

feet budgets, s taffing, and pr ior i t iesthroughout the corporat ion. "Planningc h a l l e n g e s a n d o p p o r t u n i t i e s c r o s slines all the t im e," says Kitchens . "Morepeop le a re pok ing the i r noses i n o ther s 'hackyards. That createsi nc rea s ed t en s i on . Ands ince the s t r a t eg ic p l an-n i n g p r o c e s s i s c o n -t inual , so i s the tensioni t fos t e r s . " The t r i ck ,Kitchens adds, involveschanne l i ng t h e t en s i onto achieve resul ts .Progress Energy doesso th rough l ive ly de-bates among the differ-ent discipl ines. "We'vegone t o g r ea t l eng th sto c rea t e t r ansparency around a l l thedec i s ions tha t the s t r a t eg ic p l ann ingprocess produces," sa ys Steve McDow-ell, a Progress Energy st rategic plan ne r ."Doing so helps p reven t par t i c ipan t sfrom holding their cards too closely tothei r chests."

Communications. In many w ay s ,c o m m u n i c a t i n g r e p r e s e n t s t h e s t r a -

One of the keys to asuccessful strategy is

making sure everyoneunderstands that you

have that strategy, whyyou have that strategy,

and how it's beingimplemented.

t e g ic p l a n n e r ' s m o s t i m p o r t a n t r e -spons ib i l i ty . Af t er a l l , p l anner s mustcommun icat e to secure exe cu tive sup-por t , fos t e r i n t e rna l and ex t erna l co l -l abora t ion , an d shephe rd a p roduct ivec o n v e r s a t i o n t o h e l pfinal ize s t rategic plans.They must also conveyth e f i n i sh ed p l a n t oi n t e r n a l a n d e x t e r n a ls t akeho lder s ."One of the keys toa successfu l s t r a t egy ,"says Bol lom, " i s mak-i ng su r e ev e ryone un -der s t a nds tha t you havethat s t rategy, why youhave that s t rategy, andhow i t ' s he ing imple-men t ed . Be i ng ab l e t o commun i ca t etha t effectively is a key to success fullyimplement ing i t ."

Execution Is KeyOnce the s t r a t eg ic p l an has been con-ce i v ed , syn th es i z ed , app roved , andc o m m u n i c a t e d , t h e c o m p a n y mustex ecu te i t . When aske d what distin-


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EquaTerra3 Riverway, Suite 1660Houston, TX 77056www.equater ra.comC o n t a c tLee Ann Moore, 713/669-9292leeann.moore@equater ra.com Reduce operating costs, Improve service levels. Gain greater control a nd visibil ity of your

administrative processes. Benefit from an unbiased, balanced

approach with respect to administrativeinit iatives.

EquaTerra's Utility & Energy practice suc-cessfully leads clients through outsourcingand insourcing init iatives to achieve aneffective service delivery model. Acrossadministrative processes such as HumanResources. Finance & Accounting, informa-tion Technology, Customer Service andProcurementwe add value throughout theentire lifecycle, from strategy and assess-ment through imp lementat ion, t ransi t ion,and governance.

Our recent util ity and energy clients includeTXU, Xcel Energy, DTE Energy and HydroOne.Our advisors have util ity industry depthand regulatory expertise regarding costrecovery.We have over 160 advisors a\raging 20+years experience.Last year, we advised on outsourcingcontracts with more than $5 bill ion in totalcontract value.Our advisors possess skill sets unparalleledelsewhere in the industry; bringing multi-di-mensional experience as enterprise execu-tives, service providers, and consultants toeach c l ient engagement.

EQUATERRA

guishes effective strategic planningprocessesfrom hose that are not, Mas-choff does not hesitate. "Execution."he says. "It boils down to how a com-pany measures per-formance and holdsitself accountable. Ahalf decent strategyexecuted excellentlyis tnuch better thana great strategy ex-ecuted poorly.""Once you've cho-sen a strategy, youneed the discipline tostick with it," Scalisesays. "That disciplinecomes from creatingthe metrics and gov-ernance process andsticking to monitor-ing." That helps strate-gic planners' fondnessfor the BalancedScorecard. SaskPowerrecently began us-ing the performancemanagement tool ,and Ameren has usedthe methodology tomonitor and report

A c c e n t u r ewww.accenture.com/ut i l i t ies6A l i xP ar t n er s , L L Pwww-alixpartners.comC R A I n t e r n a t i o n a lwww.crai .comEnspir ia Solut ions, inc.www.enspir ia.comE q u aT er r awww.equater ra.comFTI Consul t ing , Inc.www . fticonsu It i ng.comHuron Consuming Groupwww.huronconsult inggroup.comK E M Awww.kema.comNavigant Consumingwww.nav igantconsult ing.comO l i ve r W ym anwww.ol iverwyman.comPreng & Associateswww.preng.comW o o d M a c k e n z i ewww.woodmac.com

on the execution of its strategic plansfor about a decade.In fact, the new breed of strategicplanner talks much more about score-cards, performancemoni tor ing , com-pensation links, andother componentsof execution thanplanning methodolo-gies. On that countMintzberg would bepleased. Strategicplanning functions atmany electric utilitycompanies are leanerand more focused onstrategic thinking thanthey were a decadeago. While readingMintzberg may havehelped strategic plan-ners mold their func-tions during the pastfew years, reading l-xecution: Vie Discipliof Getting Things Domay prove more valu-able in helping themguide their organiza-tions in the future.


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